Van Brunt Properties, LLC; and “John Does” and “Jane Does” No.1-100, the last names being fictitious and unknown to the plaintiff, the persons and parties intended being the tenants, occupants, persons or corporations, if any, having or claiming an interest in or lien upon the premises described in the verified amended complaint, Defendant. Plaintiff, Sutter Avenue Management, LLC Miller Lumber & Mill Work Inc.; And “John Does” and “Jane Does” #1-100, the last names being fictitious and unknown to the plaintiff, the persons and parties intended being the tenants, occupants, persons or corporations, if any, having or claiming an interest in or lien upon the premises described in the verified amended complaint, Defendants.

Plaintiff, – against –

against

Sutter Avenue Management, LLC Miller Lumber & Mill Work Inc.; And “John Does” and “Jane Does” #1-100, the last names being fictitious and unknown to the plaintiff, the persons and parties intended being the tenants, occupants, persons or corporations, if any, having or claiming an interest in or lien upon the premises described in the verified amended complaint, Defendants.

3523/10

Plaintiff Attorney: Dacia C Cocariu, Esq.

Sills Cummis & Gross

Defense Attorney: Kirk P. Tzandies, Esq

Yvonne Lewis, J.

Defendant Van Brunt Properties, LLC (Van Brunt) and defendant Sutter Avenue Management, LLC (Sutter) collectively move for an order, pursuant to [*2]Civil Practice Law and Rules (CPLR) §602(a), to consolidate the foreclosure action of Citibank, N.A. v Sutter Avenue Management, LLC., Midwood Lumber & Mill Work, Inc., et al. (Index No. 354/10), into the foreclosure action of Citibank, N.A. v Van Brunt Properties, LLC, et al. (Index No. 3523/10). Upon consolidation, the defendants seek an order, pursuant to the doctrine of collateral estoppel, declaring that this court’s March 4, 2011 order in the Van Brunt action is equally binding on the Sutter action. The defendants further move for equitable relief in the Sutter action based on their assertion that Citibank acted unconscionably and in bad faith during the protracted period of settlement negotiation. Finally the defendants seek an order terminating the temporary receivership imposed on the Sutter property.

Citibank cross-moves for an order striking all references to conduct and statements made during settlement negotiations, including a pre-negotiation agreement (signed by all three parties), which together form much of the basis of the defendants’ claims for equitable relief, in the Van Brunt action under CPLR § 4547. Citibank also cross-moves, pursuant to CPLR §1018, to substitute Wells Fargo as the plaintiff in the Van Brunt action, and, pursuant to CPLR §3025, to correspondingly amend the case caption. Finally, Citibank cross-moves for an order clarifying the portion of this court’s March 4th order which requires Van Brunt to commence making monthly payments to Citibank.

Background and Procedural History

Sutter is the legal and equitable owner of premises located at 529 Sutter Avenue in Brooklyn. On October 29, 2007, Citibank entered into a mortgage loan in the principal amount of $2,610,000.00 with Sutter. Van Brunt is the legal and equitable owner of premises located at 252-254 Van Brunt Street, also in Brooklyn, which is encumbered by a mortgage in the amount of $950,000.00 financed by Citibank, dated March 21, 2007. Roland Dib is a managing member of both Sutter and Van Brunt. Both the defendants began to have difficulty meeting their mortgage obligations and assert that attempts were made in late 2008 and early 2009 to negotiate with Citibank for a modification of the interest rate so that the requisite payments could be made. The defendants assert that they expended substantial sums to attract new tenants to the properties.

Commencing on July 1, 2009, Van Brunt failed to make its required monthly payments.. Citibank contends that on December 16,2009, it notified Van Brunt that it was in default and advised that if the default was not cured, Citibank reserved its right to exercise all of its rights and remedies. Citibank initiated a foreclosure proceeding against Van Brunt on February 5, 2010.On August 9, 2010, Citibank moved for summary judgment on its foreclosure action against Van Brunt and sought dismissal of Van Brunt’s answer and affirmative defenses and the appointment of a temporary receiver. Van Brunt cross-moved for an order determining that Citibank was not entitled to: any interest on the principal balance of the mortgage loan, late charges, advances, attorneys’ fees, prepayment penalties, commissions and all other costs and expenses. On October 15, 2010, Citibank transferred all interest in the note and mortgage, as well as the other loan documents, to LSREF2 Nova Investments, LLC (“Nova”). On December 10, 2010, all interest in the note and mortgage , together with the other loan documents, were transferred to Wells Fargo. On June 24, 2011, Citibank moved to substitute Wells Fargo into the action as the plaintiff.

In an order dated March 4, 2011, this Court denied that branch of [*3]Citibank’s motion seeking the appointment of a receiver, and denied without prejudice that branch of the motion seeking substitution and for summary judgment. The order granted Van Brunt’s cross motion to the extent of ordering that Citibank is not entitled to any interest from the date of the alleged default to and through March 31, 2011 and found that Citibank is not entitled to any default interest or expenses, including attorneys fees and prepayment penalties. Van Brunt was directed to pay the principal and interest due under the loan commencing on April 1, 2011. In addition, it was directed to pay to Citibank by April 1, 2011, the principal only from the date of default to March 31, 2011, which would be applied to the reduction of the principal.

As regards Sutter, beginning October 2009 it failed to make its required monthly payments under the mortgage. By letter dated December 16, 2009, Citibank maintains that it advised Sutter that it was in default and that failure to cure could result in Citibank exercising its right to accelerate the indebtedness. On February 5, 2010, Citibank filed a separate foreclosure action against the Sutter property. On February 24, 2010, a receiver was appointed to manage the Sutter property.On May 26, 2011, Citibank moved for summary judgment on its foreclosure action and to dismiss Sutter’s answer and affirmative defense. On October 15, 2010, Citibank transferred all interest in the note and mortgage, as well as the other loan documents, to LSREF2 Nova Investments, LLC (“Nova”). On December 10, 2010, all interest in the note and mortgage , together with the other loan documents, were transferred to Wells Fargo. On April 11,2011, Citibank moved to substitute Wells Fargo into the action as the plaintiff.

Defendants’ Motion

Consolidation

The defendants move to consolidate the Van Brunt and Sutter actions arguing that both actions involve common questions of law and fact and arise from the same facts and circumstances and assert the identical legal theories and defenses, in accord with the direction of §602(a) of the CPLR. If successful on the issue of consolidation, the defendants then seek an order, pursuant to the doctrine of collateral estoppel, declaring that this court’s March 4, 2011 order in the Van Brunt action is equally binding on the Sutter action. The defendants further move for equitable relief in the Sutter action based on their assertion that Citibank acted unconscionably and in bad faith during the protracted period of settlement negotiation. Finally the defendants seek an order terminating the temporary receivership imposed on the Sutter property.They further contend that the resolution of both cases will involve the same documents and witnesses and thus, such overlap, necessitates consolidation to avoid unnecessary costs, delays and inconsistent judgments. Finally, they contend that there would be no prejudice to Citibank if the actions were consolidated arguing that both actions are in the same pre-discovery stage.

The defendants assert that Citibank treated the two mortgages as a package from the moment of default, noting for example, that Citibank alleges that it notified both properties of default on the same day and that all renegotiation’ efforts were done with both properties and as a package. The defendants note that every transfer of the property – October 15, 2010 to Nova and December 10, 2010 to Wells Fargo – was packaged as well. They argue that both of the defendants’ theory of the case is that foreclosure should be denied due to the bad faith and unconscionable behavior of Citibank throughout the course of said joint negotiations. They allege that they were jointly induced [*4]to make substantial personal investments in the respective properties at issue, based on an implied promise by Citibank that this show of good faith on the defendants’ part would result in a renegotiation of both mortgages, thereby avoiding default. The defendants conclude that the substance and legal theories of both cases are identical, will require the same testimony and evidence to be presented to the court, and should therefore be consolidated to avoid unnecessary costs, delay and inconsistent judgments.In opposition, Citibank argues that Van Brunt and Sutter are foreclosure actions filed separately by Citibank on February 5th, 2010 against two different commercial borrowers, namely Van Brunt Properties LLC, et al. and Sutter Avenue Management, LLC, et. al., each of whom holds a mortgage on a distinct property. They further point out that the circumstances under which each loan was made, the loan documents, and the defaults differ from one another. Moreover, Citibank avers that the receivership status and procedural posture of each case differs. Citibank maintains that consolidation should be denied inasmuch as the two actions do not have the requisite common issues of law and fact. Citibank also argues that it would be prejudiced by consolidation since consolidation would delay the resolution while both actions were aligned with one another. Finally, Citibank claims that the defendants are only seeking consolidation in an attempt to obtain a more favorable outcome, noting that there was no motion for consolidation until, this court’s ruling favorable to Van Brunt in the Van Brunt action.

Discussion

Section 602(a) of the CPLR gives a court discretion to consolidate actions where common questions of law or fact are present. Consolidation is preferred where these commonalities exist, absent proof that consolidation will prejudice a substantial right of the party opposing the motion (Best Price Jewelers.Com, Inc. v Internet Data Stor. & Sys., Inc., 51 AD3d 839 [2008]; Beerman v Morhaim, 17 AD3d 302 [2005]; Progressive Insurance Co. v Vasquez, 10 AD3d 518, 519 [2004]; Zupich v Flushing Hosp. & Med. Ctr., 156 AD2d 677, 677 [1989]). Further, consolidation is appropriate where it will avoid unnecessary duplication of trials, save unnecessary costs and expense, and prevent an injustice which would result from divergent decisions based on the same facts (see Zupich, 156 AD2d at 677). The defendants assert that their respective actions raise identical factual and legal issues, that the two properties have been dealt with as a package since they defaulted, that there will be little delay as the result of consolidation, that there would be no substantial prejudice to the plaintiff and therefore consolidation is required. The plaintiff does not dispute that the two properties were dealt with as a package during the period of renegotiation of their mortgages, but opposes the consolidation of these actions primarily on the ground that substantial prejudice would result from the delay that such a consolidation would cause. It avers that each action has an independent mortgage related to a separate and distinct parcel of land, that consolidation will unduly and additionally delay resolution and that the defendants’ motion is an attempt to forum shop in order to get a more favorable outcome in both actions

Absent a showing of prejudice to a substantial right the existence of common questions of law or fact justifies the grant of a motion for consolidation. (Lamboy v. Inter Fence Co., 196 AD2d 705, 601 N.Y.S.2d 619 (1st Dept.1993).However, a delay which would prevent a trial from taking place for “some time to come” has justified the denial of such a motion, Mulligan v. Farmingdale Union Free School District No. 22, 133 AD2d 617, 519 N.Y.S.2d [*5]725 (2d Dept.1987). In the instant actions, there are, as the plaintiff suggests, different procedural postures but these differences are not likely to cause such a delay as would substantially prejudice the plaintiff. The plaintiff does argue that it will be so prejudiced, but the arguments consist of conclusory self-serving statements that prejudice would occur if consolidation were ordered. The plaintiff suggests that there will be a delay “while the actions [are] brought in line with each other.” The major delay , appears to be caused by the appeals this Court’s March 4, 2011 Order, and the appeal of the instant motion, regardless of the out come. The plaintiff’s counsel says, “[t]rying to bring these actions in line with each other, so that they can proceed together, would only create undue delay and confusion, allowing defendant to prolong the proceedings and avoid judgement to Plaintiff’s severe prejudice.” Counsel does say not how the plaintiff is prejudiced nor what the prejudice is. There is no showing of prejudice to a substantial right of the plaintiff. “[A] and mere delay of the trial is not a sufficient basis upon which to deny a motion for consolidation or a joint trial (see Alsol Enters., Ltd. v. Premier Lincoln—Mercury, Inc., 11 AD3d 494, 783 N.Y.S.2d 620; Zupich, 156 AD2d at 677).” (Whiteman v Parsons Transportation Group of New York, Inc, et al. 72 AD3d 677, 900 N.Y.S.2d 87 ( 2d Dept 2010)

” Although a motion pursuant to CPLR 602 (a) to consolidate two pending actions is addressed to the sound discretion of the trial court, consolidation is favored by the courts in serving the interests of justice and judicial economy (see, Zupich v Flushing Hosp. & Med. Ctr., 156 AD2d 677). As both actions clearly involve similar issues of fact and law, it [would be] an improvident exercise of discretion to deny consolidation….” (Flaherty v RCP Assoc., 208 AD2d 496, 616 N.Y.S.2d 801,[ 1994]). In the case at bar, there are issues, with regard to whether the plaintiff and or its assigns have acted in good faith, which necessarily must be decided prior to a determination of whether the foreclosure of the defendants’ properties should go forward.These actions arise from the same factual events, involve virtually identical legal theories and defenses; they feature nearly the same principal parties. ” Where common questions of law or fact exist, a motion pursuant to CPLR 602(a) to consolidate … should be granted absent a showing of prejudice to a substantial right of the party opposing the motion (see Mas—Edwards v. Ultimate Servs., Inc., 45 AD3d 540, 845 N.Y.S.2d 414; Perini Corp. v. WDF, Inc., 33 AD3d 605, 606, 822 N.Y.S.2d 295; Nationwide Assoc. v. Targee St. Internal Med. Group, P.C. Profit Sharing Trust, 286 AD2d 717, 730 N.Y.S.2d 349).

Collateral Estoppel

The defendants seek an order, pursuant to the doctrine of collateral estoppel, declaring that this Court’s March 4, 2011 order in the Van Brunt action is equally binding on the Sutter action. They urge the utilization of the doctrine of issue preclusion which is part of Collateral Estoppel. In order for a court’s ruling to be dictated by the decision made in a prior action under the doctrine of issue preclusion, “the identical issue necessarily must have been decided in the prior action and be decisive of the present action, and second, the party to be precluded from relitigating the issue must have had a full and fair opportunity to contest the prior determination” (Kaufman v Eli Lily and Co., 65 NY2d 449, 455 [1985]; Allied Chemical v Niagra Mohawk Power, 72 NY2d 271, 276 [1988]. When a court decides whether issue preclusion applies in a given case “the party seeking the benefit of collateral estoppel bears the initial burden of demonstrating that an issue in the present litigation is identical to an issue decided in the prior determination” (Lewis v City of New York, 17 Misc 3d [*6]537, 544 [2007]. The defendants further move for equitable relief in the Sutter action based on their assertion that Citibank acted unconscionably and in bad faith during the protracted period of settlement negotiation and that Citibank treated Van Brunt and Sutter identically during the course of said negotiation. For which reason, the defendants believe that Sutter is entitled to the relief granted to Van Brunt in this Court’s March 4, 2011 order.

Citing Halyalkar v. Board of Regents of the State of NY, 72 NY2d 261,268, the plaintiff, argues in opposition, that collateral estoppel is inapplicable unless the matter has been “actually litigated” The plaintiff’s counsel buttresses Citibank’s argument with a reminder that the actions “involve, among other things, different loan transactions and different parties. Most notably, the Sutter Loan Documents and the circumstances of Sutter’s default have never even been before this Court.” In sum, the argument is that collateral estoppel cannot be applied herein because there has been no actual litigation of the foreclosure in the Sutter action. Halyalkar,defines actually litigated’ as follows: “To satisfy the identicality requirement, the question must have been actually litigated and, therefore, it must have been properly raised by the pleadings or otherwise placed in issue and actually determined in the prior proceeding.” Halyalkar, supra at 261.

This Court’s March 4, 2011order in the Van Brunt action was issued after consideration of the papers and after oral argument on several motions which were before the Court. The motions and cross motion were before the court on March 4th and they were heard together. The plaintiff’s motions sought a temporary receiver, substitution and summary judgement on the foreclosure. The relief requested was denied with express permission to re-file both as to substitution and summary judgement. The motion for a temporary receiver can be made anew at anytime during the course of the proceeding where new facts arise. The defendants cross motion sought equitable relief; the plaintiff responded with opposition and oral argument was heard on the motion. The March 4th Order resulted from a full presentation by the parties on the issues before the court. As relevant to the collateral estoppel, the order addresses the behavior of the parties in that action and the consequences of that behavior with regard to the period following the “default” and renegotiation efforts made by the parties. It is not a permanent determination with regard to the foreclosures of the subject properties, rather it is the imposition of an equity equalizer put in place in recognition of the fact that Citibank and its assigns, as determined on papers and after oral argument, did actively prolong these proceeding with such lack of good faith as to require that they should forfeit any interest that would have otherwise been owning to them under the terms of the agreement they had with the borrowers. All of the renegotiation efforts were made with both Van Brunt and Sutter and at all the same times and places. Citibank had a full and fair opportunity to contest the prior determination; the issues were actually litigated in the Van Brunt action. In as much as the behavior of the lenders in the Van Buren action were identical, both in substance and in time, to the behavior of the lenders in Sutter, this Court cannot see how any different outcome for the Sutter action can fail to be an inconsistent result and a waste of judicial resources.

Finally the defendants seek an order terminating the temporary receivership imposed on the Sutter property. This Court is without sufficient information to make a determination as to wether or not the temporary receiver should be removed. Upon consolidation, and in as much as the papers are already before the Court, defendant Sutter may request a [*7]conference/argument with the plaintiff on the appropriateness/lack of need for the receiver.

Citibank’s Cross Motion.

Citibank cross-moves for an order finding that all conduct and statements over the course of settlement negotiations entered into between Citibank and the defendants, including the pre-negotiation agreement signed by all three parties, be ruled inadmissable in the Van Brunt action, pursuant to CPLR § 4547. Citibank also cross moves for an order seeking to substitute Wells Fargo as the plaintiff in the Van Brunt action and that the case caption be amended accordingly. Finally, Citibank cross-moves for clarification of two rulings contained in this court’s March 4, 2011 order.

In opposition to Citibank’s cross motion, the defendants argue that the cross motion and opposition papers should not be considered as such submissions were untimely and defective. On the issue of timeliness, the court notes that CPLR §2215 pertinently provides that “[a]t least three days prior to the time at which the motion is noticed to be heard, or seven days prior to such time if demand is properly made pursuant to subdivision (b) of rule 2214, a party may serve upon the moving party a notice of cross-motion demanding relief, with or without supporting papers . . .” Here, the defendants motion was served upon the plaintiff on April 6, 2011. The cross motion was not served until June 20, 2011, a full seventy-five days later.

The defendants further argue that the plaintiff’s papers are defective and should not be considered by the court. Specifically, it is argued that the papers are defective because they are submitted in reliance upon an affidavit of Marisa K. McGuaghey, who describes herself as an “authorized representative of Hudson Americas LLC” and bases her authority to submit her affidavit on behalf of Wells Fargo pursuant to an undated, uncertified copy of a Limited Power of Attorney. A power of attorney presented to the Court must be an original or a copy certified by an attorney, pursuant to CPLR §2105. Section 2105 of the CPLR states, inter alia, that “an attorney admitted to practice in the court of the state may certify that it has been compared by him with the original and found to be a true and complete copy” (see Security Pacific Nat. Trust Co. v Cuevas, 176 Misc 2d 846 [1998]). Here, there is nothing in the record indicating that the plaintiff’s attorney has performed this comparison (see Lasalle Bank N.A. v Smith, 26 Misc 3d 1239A [2010]; United States Bank Natl. Assn. v White, 22 Misc 3d 1112A [2009]; U.S. Bank Natl. Assn. v Bernard,18 Misc 3d 1130A [2008]). Additionally, the court notes that the fact that the limited power of attorney is undated is a further defect (see Ameriquest Mortgage Co., v Basevich, 16 Misc 3d 1104A [2007]. Based upon the foregoing, the court finds that the plaintiff’s papers are defective and therefore will not address the merits, or lack thereof, of the plaintiff’s cross motion.

New York government officials are continuing their assault against foreclosure actions where Mortgage Electronic Registration Systems, Inc. (“MERS”) was the assignee of the mortgage, and challenges to foreclosures involving MERS are increasingly gaining traction in New York courts. Recently, the New York State Attorney General filed a complaint against MERS and several banks alleging fraud and deception in foreclosure proceedings. People v. JPMorgan Chase Bank N.A., No. 2012/2768 (N.Y. Sup. Ct. Feb. 3, 2012). In addition, three New York trial courts have decided motions involving standing and other issues in such actions. CIT Group/Consumer Fin., Inc. v. Platt, 33 Misc. 3d 1231(A) (N.Y. Sup. Ct. 2011); U.S. Bank N.A. v. Bressler, 33 Misc. 3d 1231(A) (N.Y. Sup. Ct. 2011); Bank of New York Mellon v. Martinez, 33 Misc. 3d 1215(A) (N.Y. Sup. Ct. 2011). Two courts ruled against the foreclosing banks, finding they did not have standing to foreclose where MERS assigned a mortgage without express authority to do so or sufficient documentation evidencing that the note was also transferred. Although the third court dismissed a lack of standing defense, it did so solely for procedural reasons.

U.S. Bank National Association, AS TRUSTEE FOR SG MORTGAGE SECURITIES ASSET BACKED CERTIFICATES, SERIES 2006-FRE2, Plaintiff,

against

Alan Bressler, CCU LLC, MERS, INC. ET AL, Defendants.

33920/08

Debra Silber, J.

Recitation, as required by CPLR 2219(a), of the papers considered in the review of plaintiff’s motion for summary judgment and for the appointment of a Referee to compute in this foreclosure action, and defendant’s cross-motion to dismiss.

PapersNumbered

Notice of Motion and Exhibits Annexed ……………………………….1-12

Cross-motion and Exhibits Annexed ……………………………………13- 20

Answering Affidavits …………………………………………………………21-30

Reply Affidavits ………………………………………………………………..

Other:

Upon the foregoing cited papers, the Decision/Order on this application is as follows:

Plaintiff’s motion for summary judgment and the appointment of a referee to compute in this foreclosure action concerning 1477 East 32nd Street, Brooklyn, NY, 11234, Block 7694, Lot 85, is denied and defendant mortgagor’s motion to dismiss the complaint for lack of standing is granted, for the reasons set forth herein.

Defendant Alan Bressler alleges in his Answer to the Complaint that the plaintiff lacks standing to bring this action. In response to the plaintiff’s motion for summary judgment, defendant cross moves to dismiss the foreclosure action on the grounds that plaintiff lacks standing to bring this action. The court finds that defendant is correct, and as such, the action must be dismissed.

The mortgage in question was issued by Fremont Investment and Loan on May 4, 2006. The loan states “for purposes of recording, MERS is the mortgagee of record.” The tortured history of MERS is described in Bank of NY v. Silverberg, 2011 NY Slip Op 5002, 86 AD3d 274 (2nd Dept), and need not be repeated. On December 18, 2008, an Assignment of Mortgage was executed, and subsequently recorded, which assigns the mortgage and not the note, and assigns it from MERS to plaintiff. First, the assignment of a mortgage without the note is defective as the transfer of the mortgage without the debt is a nullity. In a decision citing Silverberg, the court said “an assignment of the mortgage without assignment of the underlying note or bond is a nullity” Citimortgage, Inc. v Stosel, 2011 NY Slip Op 8319 (2nd Dept) citing U.S. Bank, N.A. v [*2]Collymore, 68 AD3d at 754; see Bank of NY v Silverberg, 86 AD3d 274, 280, 926 N.Y.S.2d 532.

Secondly, an assignment from MERS to plaintiff is defective, as MERS had no right or authority to assign the mortgage or the note. Bank of NY v Silverberg, supra. “The plaintiff, which merely stepped into the shoes of MERS, its assignor, and gained only that to which its assignor was entitled . . . did not acquire the power to foreclose by way of the

. . . assignment.” Id.

It must also be noted that not only did MERS lack the power and authority to execute the assignment on behalf of Fremont Investment and Loan on December 18, 2008, but Fremont did not exist any longer on that date, as it was first subjected to a cease and desist order from the FDIC and then went into Bankruptcy. Then, its assets were apparently sold sometime in 2010 in a Chapter 11 Bankruptcy proceeding, which started in the summer of 2008, to Signature Group Holdings Inc.[FN1]

Further, it must be noted that the execution of an Assignment of Mortgage by MERS is barred by the Settlement Agreement between the US Attorney’s Office on behalf of the United States of America and the Office of Steven J. Baum P.C. and Pillar Processing, LLC, dated October 6, 2011, which states at paragraph 14 that “Baum shall no longer permit anyone employed by or contracted by Baum to execute any assignment of a mortgage as an officer, director, employee, agent or other representative of MERSCORP, Inc., and/or Mortgage Electronic Registration Systems, Inc.” The office of Mr. Baum was the attorney for the plaintiff when this matter was commenced, the assignment at issue is stamped “Pillar Processing LLC” and is signed on behalf of MERS by Elpiniki M. Bechakas, an attorney in the office of Steven J. Baum, according to the public internet attorney registration website maintained by the State of New York.

To the extent that plaintiff’s counsel opposes the defendant’s motion to dismiss with various affirmations of counsel, including one that states that the Note was indeed also assigned, and annexes (Exhibit B) a photocopy of a document alleged to be an assignment of the note, which is merely a blank piece of paper that states “Pay to the order of US Bank National Association as Trustee, without recourse,” and is undated and signed by “Michael Koch, Vice President, Fremont Investment and Loan,” this is insufficient. Ms. Jones, Vice President for Loan Documentation for Wells Fargo Bank N.A., states in her affidavit (Paragraph 5) “the Note was endorsed and was physically delivered to Wells Fargo/ASC as servicing agent and custodian for US Bank prior to the commencement of this action . . . Thus, Wells Fargo’s records specifically reflect that, it was in physical possession of the endorsed note prior to the commencement of this action.” The language in the affidavit indicates that the loan was assigned and transferred to plaintiff while Fremont Investment & Loan was still in existence, in July of 2006, but this is the only indication of this fact, and does not indicate delivery to plaintiff, but merely alleging delivery to plaintiff’s agent for servicing without any supporting documentation. Ms Jones provides no date of the alleged delivery, and as discussed above, at the time of the alleged delivery, Fremont may not have existed, or may have been subject to the restrictions on transfer in the proceedings in Bankruptcy Court, or may have been subject to the FDIC’s cease [*3]and desist order. This cannot be ascertained without a date.

The affirmation of counsel that indicates that the current loan servicer has confirmed that the information in the complaint is accurate is also insufficient, as there is no indication that the alleged servicer is actually the servicer for this loan. The pooling and servicing agreement is between plaintiff and the servicer. There is nothing in the papers from Signature Group Holdings, Inc., the entity that now appears to own the Note and Mortgage, which confirms that they too have retained Wells Fargo as servicer for this loan.

In conclusion, plaintiff has failed to make out a prima facie case for summary judgment due to the defects in the documentation in their motion, described above. The defendant has made out a prima facie case for dismissal on the grounds that plaintiff lacked standing at the time the action was commenced, and may in fact still lack standing, which plaintiff has not overcome with any documentation, in admissible form or not, to prevent dismissal of the complaint.

U.S. Bank National Association, AS TRUSTEE FOR SG MORTGAGE SECURITIES ASSET BACKED CERTIFICATES, SERIES 2006-FRE2, Plaintiff,

against

Alan Bressler, CCU LLC, MERS, INC. ET AL, Defendants.

33920/08

Debra Silber, J.

Recitation, as required by CPLR 2219(a), of the papers considered in the review of plaintiff’s motion for summary judgment and for the appointment of a Referee to compute in this foreclosure action, and defendant’s cross-motion to dismiss.

PapersNumbered

Notice of Motion and Exhibits Annexed ……………………………….1-12

Cross-motion and Exhibits Annexed ……………………………………13- 20

Answering Affidavits …………………………………………………………21-30

Reply Affidavits ………………………………………………………………..

Other:

Upon the foregoing cited papers, the Decision/Order on this application is as follows:

Plaintiff’s motion for summary judgment and the appointment of a referee to compute in this foreclosure action concerning 1477 East 32nd Street, Brooklyn, NY, 11234, Block 7694, Lot 85, is denied and defendant mortgagor’s motion to dismiss the complaint for lack of standing is granted, for the reasons set forth herein.

Defendant Alan Bressler alleges in his Answer to the Complaint that the plaintiff lacks standing to bring this action. In response to the plaintiff’s motion for summary judgment, defendant cross moves to dismiss the foreclosure action on the grounds that plaintiff lacks standing to bring this action. The court finds that defendant is correct, and as such, the action must be dismissed.

The mortgage in question was issued by Fremont Investment and Loan on May 4, 2006. The loan states “for purposes of recording, MERS is the mortgagee of record.” The tortured history of MERS is described in Bank of NY v. Silverberg, 2011 NY Slip Op 5002, 86 AD3d 274 (2nd Dept), and need not be repeated. On December 18, 2008, an Assignment of Mortgage was executed, and subsequently recorded, which assigns the mortgage and not the note, and assigns it from MERS to plaintiff. First, the assignment of a mortgage without the note is defective as the transfer of the mortgage without the debt is a nullity. In a decision citing Silverberg, the court said “an assignment of the mortgage without assignment of the underlying note or bond is a nullity” Citimortgage, Inc. v Stosel, 2011 NY Slip Op 8319 (2nd Dept) citing U.S. Bank, N.A. v [*2]Collymore, 68 AD3d at 754; see Bank of NY v Silverberg, 86 AD3d 274, 280, 926 N.Y.S.2d 532.

Secondly, an assignment from MERS to plaintiff is defective, as MERS had no right or authority to assign the mortgage or the note. Bank of NY v Silverberg, supra. “The plaintiff, which merely stepped into the shoes of MERS, its assignor, and gained only that to which its assignor was entitled . . . did not acquire the power to foreclose by way of the

. . . assignment.” Id.

It must also be noted that not only did MERS lack the power and authority to execute the assignment on behalf of Fremont Investment and Loan on December 18, 2008, but Fremont did not exist any longer on that date, as it was first subjected to a cease and desist order from the FDIC and then went into Bankruptcy. Then, its assets were apparently sold sometime in 2010 in a Chapter 11 Bankruptcy proceeding, which started in the summer of 2008, to Signature Group Holdings Inc.[FN1]

Further, it must be noted that the execution of an Assignment of Mortgage by MERS is barred by the Settlement Agreement between the US Attorney’s Office on behalf of the United States of America and the Office of Steven J. Baum P.C. and Pillar Processing, LLC, dated October 6, 2011, which states at paragraph 14 that “Baum shall no longer permit anyone employed by or contracted by Baum to execute any assignment of a mortgage as an officer, director, employee, agent or other representative of MERSCORP, Inc., and/or Mortgage Electronic Registration Systems, Inc.” The office of Mr. Baum was the attorney for the plaintiff when this matter was commenced, the assignment at issue is stamped “Pillar Processing LLC” and is signed on behalf of MERS by Elpiniki M. Bechakas, an attorney in the office of Steven J. Baum, according to the public internet attorney registration website maintained by the State of New York.

To the extent that plaintiff’s counsel opposes the defendant’s motion to dismiss with various affirmations of counsel, including one that states that the Note was indeed also assigned, and annexes (Exhibit B) a photocopy of a document alleged to be an assignment of the note, which is merely a blank piece of paper that states “Pay to the order of US Bank National Association as Trustee, without recourse,” and is undated and signed by “Michael Koch, Vice President, Fremont Investment and Loan,” this is insufficient. Ms. Jones, Vice President for Loan Documentation for Wells Fargo Bank N.A., states in her affidavit (Paragraph 5) “the Note was endorsed and was physically delivered to Wells Fargo/ASC as servicing agent and custodian for US Bank prior to the commencement of this action . . . Thus, Wells Fargo’s records specifically reflect that, it was in physical possession of the endorsed note prior to the commencement of this action.” The language in the affidavit indicates that the loan was assigned and transferred to plaintiff while Fremont Investment & Loan was still in existence, in July of 2006, but this is the only indication of this fact, and does not indicate delivery to plaintiff, but merely alleging delivery to plaintiff’s agent for servicing without any supporting documentation. Ms Jones provides no date of the alleged delivery, and as discussed above, at the time of the alleged delivery, Fremont may not have existed, or may have been subject to the restrictions on transfer in the proceedings in Bankruptcy Court, or may have been subject to the FDIC’s cease [*3]and desist order. This cannot be ascertained without a date.

The affirmation of counsel that indicates that the current loan servicer has confirmed that the information in the complaint is accurate is also insufficient, as there is no indication that the alleged servicer is actually the servicer for this loan. The pooling and servicing agreement is between plaintiff and the servicer. There is nothing in the papers from Signature Group Holdings, Inc., the entity that now appears to own the Note and Mortgage, which confirms that they too have retained Wells Fargo as servicer for this loan.

In conclusion, plaintiff has failed to make out a prima facie case for summary judgment due to the defects in the documentation in their motion, described above. The defendant has made out a prima facie case for dismissal on the grounds that plaintiff lacked standing at the time the action was commenced, and may in fact still lack standing, which plaintiff has not overcome with any documentation, in admissible form or not, to prevent dismissal of the complaint.

OPINION AND JUDGMENT ENTRY

McDONALD, Judge.

{¶1} This case is before the court upon the motion for summary judgment as to lien priority filed by plaintiff OneWest Bank, FSB, against intervening defendant CitiMortgage, Inc. Upon consideration of the pleadings, the evidence, the written arguments of counsel, and the applicable law, I find that the motion for summary judgment should be granted.

I

{¶2} Defendant Kevin Dorner is the current owner of real estate located at 2026 N. Michigan Street, Toledo, Lucas County, Ohio (“the property”).

{¶3} On April 5, 2005, Dorner executed a mortgage and note on the property in favor of mortgagee Mortgage Electronic Registration Systems, Inc. (“MERS”). Mortgage Method, L.L.C. was the lender.[1]

{¶4} On February 8, 2007, Dorner executed a mortgage and note on the property in favor of mortgagee MERS. Indymac Bank, FSB was the lender.[2]

{¶5} On October 13, 2009, OneWest filed its complaint for foreclosure on its mortgage and note against Dorner, unknown spouse (if any) of Dorner, and the city of Toledo, Department of Public Utilities (“the city”). The city filed an answer to the complaint.

{¶6} On October 13, 2009, a preliminary judicial report for the property was filed.

{¶7} On October 22, 2009, the notice of filing of the final judicial report for the property was filed.

{¶8} On November 16, 2009, OneWest filed a motion for default judgment against Dorner and his unknown spouse, if any. This motion was granted.

{¶9} On December 18, 2009, CitiMortgage filed a motion to intervene as a party defendant. This motion was granted.

{¶10} On January 13, 2010, CitiMortgage filed an answer, cross-claim, and counterclaim. In its cross-claim and counterclaim, CitiMortgage alleges that Dorner is in default under the note and mortgage filed April 11, 2005, that it declared the debt due, and that it is entitled to have the mortgage foreclosed. CitiMortgage further alleges that OneWest and the city may claim an interest in the property. CitiMortgage prays that its mortgage be adjudged a valid first lien on the property, that its mortgage be foreclosed, that the property be sold, and that CitiMortgage be paid out of the proceeds of the sale. OneWest filed a reply to the counterclaim.

{¶11} An order of sale for the property was issued on March 5, 2010.

{¶12} On March 15, 2010, OneWest filed its motion for summary judgment as to the lien priority between its mortgage and CitiMortgage’s alleged mortgage.

{¶13} On April 20, 2010, CitiMortgage filed its motion to stay the sheriff sale so that the dispute over the priority of liens could be resolved. This motion was granted on May 4, 2010.

{¶14} On August 23, 2010, CitiMortgage filed an opposition to OneWest’s motion for summary judgment. Thereafter, OneWest filed a reply. The motion is now decisional.

{¶16} “The appositeness of rendering a summary judgment hinges upon the tripartite demonstration: (1) that there is no genuine issue as to any material fact; (2) that the moving party is entitled to judgment as a matter of law; and (3) that reasonable minds can come to but one conclusion, and that conclusion is adverse to the party against whom the motion for summary judgment is made, who is entitled to have the evidence construed most strongly in his favor.

{¶17} “The burden of showing that no genuine issue exists as to any material fact falls upon the moving party in requesting a summary judgment.”

{¶18} A party who claims to be entitled to summary judgment on the ground that a nonmovant cannot prove its case bears the initial burden of (1) specifically identifying the basis of its motion, and (2) identifying those portions of the record that demonstrate the absence of a genuine issue of material fact regarding an essential element of the nonmovant’s case. Dresher v. Burt (1996), 75 Ohio St.3d 280, 293; see also Dresher, 75 Ohio St.3d at 299 (Pfeifer, J., concurring in judgment only). The movant satisfies this burden by calling attention to some competent summary-judgment evidence, of the type listed in Civ.R. 56, affirmatively demonstrating that the nonmovant has no evidence to support his or her claims. Id. Once the movant has satisfied this initial burden, the burden shifts to the nonmovant to set forth specific facts, in the manner prescribed by Civ.R. 56(E), indicating that a genuine issue of material fact exists for trial. Dresher at 293. Accord Mitseff v. Wheeler (1988), 38 Ohio St.3d 112, 114-115.

{¶20} “We recognize that summary judgment, pursuant to Civ.R. 56, is a salutary procedure in the administration of justice. It is also, however, a procedure which should be used cautiously and with the utmost care so that a litigant’s right to a trial, wherein the evidentiary portion of the litigant’s case is presented and developed, is not usurped in the presence of conflicting facts and inferences. * * * It is settled law that `[t]he inferences to be drawn from the underlying facts contained in the affidavits and other exhibits must be viewed in the light most favorable to the party opposing the motion, * * *’ which party in the instant case is appellant. * * * It is imperative to remember that the purpose of summary judgment is not to try issues of fact, but rather to determine whether triable issues of fact exist.” (Citations omitted.)

{¶22} In opposition, CitiMortgage asserts that its mortgage, which properly described the property, was recorded first, and OneWest had actual or constructive notice of the mortgage. CitiMortgage claims that pursuant to R.C. 5301.23, it is entitled to priority because first in time should be first in right, and its mortgage was recorded almost two years before OneWest’s mortgage. CitiMortgage submits that even if there is an error in the acknowledgement clause, this mistake does not void the instrument, as it is subject to reformation pursuant to R.C. 2719.01. CitiMortgage maintains that OneWest would be unjustly enriched if OneWest were allowed to maintain an interest in the property to the exclusion of CitiMortgage.

{¶23} In its reply, OneWest observes that R.C. 5301.23 is not applicable, as it applies to only properly executed mortgages. OneWest agrees with CitiMortgage that first in time means first in right, but OneWest notes that this provision applies to only properly executed mortgages, not defective instruments. OneWest offers that Ohio law is clear that when a notary’s ackowledgement is defective, the instrument is ineffective against subsequent creditors. OneWest maintains that because its mortgage is properly executed, it takes priority over the defective mortgage, which was not entitled to be recorded and is not entitled to reformation.

{¶24} Before the motion for summary judgment is analyzed, it must be noted that the assignment of the mortgage from MERS to OneWest occurred on October 22, 2009, more than a week after OneWest filed its complaint in the present case. The notice of assignment was filed with the court less than one month later. Thus, the notice was sufficient to alert the court, Dorner, and others that OneWest was the real party in interest. See Campus Sweater & Sportswear Co. v. M. B. Kahn Constr. Co. (D.C.S.C.1979), 515 F.Supp. 64, 84-85 (because the assignment took place a year before trial, the defendant was not prejudiced by the assignment, and the assignee was the real party in interest to bring the suit.). Moreover, no party has raised the issue that OneWest is not the real party in interest. See Wachovia Bank, N.A. v. Cipriano, 5th Dist. No. 09CA007, 2009-Ohio-5470, at ¶ 38 (“Pursuant to Civ.R. 17(A), the real party of interest shall `prosecute’ the claim. The rule does not state `file’ the claim”). See also LaSalle Bank Natl. Assn. v. Street, 5th Dist. No. 08 CA 60, 2009-Ohio-1855, at ¶ 28. Accordingly, OneWest, as the real party in interest, has legal standing to bring this foreclosure action.

{¶25} With respect to the motion for summary judgment, OneWest contends that CitiMortgage’s mortgage is defective, yet CitiMortgage maintains that the mortgage should be reformed.

{¶26} R.C. 5301.01 provides:

{¶27} “(A) A deed, mortgage * * * shall be signed by the grantor, mortgagor * * *. The signing shall be acknowledged by the grantor, mortgagor * * * before a judge or clerk of a court of record in this state, or a county auditor, county engineer, notary public, or mayor, who shall certify the acknowledgement and subscribe the official’s name to the certificate of the acknowledgement.”

{¶28} R.C. 5301.23 provides:

{¶29} “(A) All properly executed mortgages shall be recorded in the office of the county recorder of the county in which the mortgaged premises are situated and shall take effect at the time they are delivered to the recorder for record. * * *

{¶30} “(B) A mortgage that is presented for record shall contain the then current mailing address of the mortgagee. The omission of this address or the inclusion of an incorrect address shall not affect the validity of the instrument or render it ineffective for purposes of constructive notice.”

{¶31} In Citizens Natl. Bank v. Denison, 165 Ohio St. at 95, the Ohio Supreme Court held that when the acknowledgment or execution of a deed is defective, the deed is ineffective as against subsequent creditors, but the deed “is valid as between the parties thereto, in the absence of fraud.” Moreover, a defectively executed mortgage is invalid as to a subsequent lienholder, even if the subsequent lienholder had actual knowledge of the prior, defectively executed mortgage. Odita, 159 Ohio App.3d 1, 2004-Ohio-5546, at ¶ 15.

{¶32} R.C. 2719.01 states:

“When there is an omission, defect, or error in an instrument in writing or in a proceeding by reason of the inadvertence of an officer, or of a party, person, or body corporate, so that it is not in strict conformity with the laws of this state, the courts of this state may give full effect to such instrument or proceeding, according to the true, manifest intention of the parties thereto.”

{¶33} Reformation of an instrument is an equitable remedy wherein a court modifies the instrument that, due to mutual mistake on the part of the original parties to the instrument, does not express the real intention of those parties. Greenfield v. Aetna Cas. & Sur. Co. (1944), 75 Ohio App. 122, 128. However, a defectively executed instrument, not acknowledged, cannot be reformed. Delfino v. Paul Davies Chevrolet, Inc. (1965), 2 Ohio St.2d 282, paragraphs two and three of the syllabus (“The curative effect of Section 2719.01, Revised Code, operates to validate instruments in relation to technical defects of content. It does not validate a lease which does not comply with the mandatory requirements of the statute of conveyances (Section 5301.01, Revised Code) as to execution. Where * * * [R.C. 5301.01] requires certain formalities for the execution of an instrument, reformation cannot be granted to supply these formalities”).

{¶34} Applying these principles to the present case, the CitiMortgage mortgage was defectively executed in that Dorner’s signature was not acknowledged by a notary public as required by R.C. 5301.01. Moreover, this defect cannot be cured by reformation. Thus, CitiMortgage’s defectively executed mortgage cannot take priority over a subsequent, valid, recorded mortgage. The record shows that OneWest’s subsequent mortgage was properly executed, valid, and recorded. Accordingly, OneWest’s mortgage is entitled to priority over CitiMortgage’s defective mortgage.

JUDGMENT ENTRY

{¶35} The court finds that there are no genuine issues of material fact and that plaintiff OneWest Bank, FSB is entitled to summary judgment as to lien priority against intervening defendant CitiMortgage, Inc. as a matter of law. It is ordered that plaintiff OneWest Bank, FSB have summary judgment against intervening defendant CitiMortgage, Inc. as to lien priority. It is further ordered that plaintiff OneWest Bank, FSB’s mortgage is entitled to priority over the defective mortgage of intervening defendant CitiMortgage, Inc.

So ordered.

[1] MERS assigned the mortgage to CitiMortgage on December 2, 2009.

[2] On November 16, 2009, OneWest filed a notice of filing of assignment of mortgage from MERS to OneWest. The assignment occurred on October 22, 2009.

Further, the verification of the complaint was not executed by an officer of WAMU, but by Benita Taylor, a “Research Support Analyst of Washington Mutual Bank, the plaintiff in the within action” a resident of Jacksonville, Florida, on June 4, 2008. This is the same day that Ms. Maio claims to have communicated with “Mark Phelps, Esq., House Counsel.” I checked the Office of Court Administration’s Attorney Registry and found that Mark Phelps is not now nor has been an attorney registered in the State of New York. Moreover, the Court does not know what “House” employs Mr. Phelps. [*5]

Both Mr. Phelps and Ms. Maio should have discovered the defects in Ms. Taylor’s verification of the subject complaint. The jurat states that the verification was executed in the State of New York and the County of Suffolk [the home county of plaintiff’s counsel], but the notary public who took the signature is Deborah Yamaguichi, a Florida notary public, not a New York notary public. Thus, the verification lacks merit and is a nullity. Further, Ms. Yamaguchi’s notarization states that Ms. Taylor’s verification was “Sworn to and subscribed before me this 4th day of June 2008.” Even if the jurat properly stated that it was executed in the State of Florida and the County of Duval, where Jacksonville is located, the oath failed to have a certificate required by CPLR

<SNIP>

Ms. Maio should have consulted with a representative or representatives of plaintiff WAMU or is successors subsequent to receiving my November 9, 2010 order, not referring back to an alleged June 4, 2008 communication with “House Counsel.” Affirmations by plaintiff’s counsel in foreclosure actions, pursuant to Chief Administrative Judge Ann t. Pfau’s October 20, 2010 Administrative Order, mandates in foreclosure actions prospective communication by plaintiff’s counsel with plaintiff’s representative or representatives to prevent the widespread insufficiencies now found in foreclosure filings, such as: failure to review files to establish standing; filing of notarized affidavits that falsely attest to such review, and, “robosigning: of documents.